The Saskatchewan Financial Services Commission is seeking to regulate firms that trade in GICs.

The SFSC is seeking comment on a proposed local rule to regulate intermediaries who trade in guaranteed investment certificates. The new rule is intended to replace the rules set out in the decision of the commission dated March 18, 1993 that govern trades in GICs by intermediaries (known as deposit agents).

The commission originally adopted the Deposit Agent Rules in response to the thefts of more than $1 million by individuals purporting to collect money from investors for the purchase of GICs and to transmit the money to financial institutions. The rules were developed with the intention of minimizing the opportunity for fraud or theft by those acting as deposit agents.

However, the SFSC says it is now time to replace the Deposit Agent Rules with new rules that are updated and written in clearer language. They should also be put on a more sound legal footing. “The [current] rules are guidelines, and if they are not complied with, it is difficult to take direct enforcement action,” SFSC notes. “In cases where an individual deposit agent has misappropriated investors’ money, the rules provide no clear means of recourse for investors.”

The new rule requires a deposit agent to register as a dealer and to be responsible for the actions of its officials and salespersons. It also requires a deposit agent to obtain insurance for losses resulting from the dishonest or fraudulent acts of its officials, salespersons and employees.

Trades in GICs by officials and salespersons of mutual fund dealers that are members of the Mutual Fund Dealers Association are exempt from the requirements of the new rule, provided
that the trade is for the mutual fund dealer’s account and through the mutual fund dealer’s facilities. Trades by officials and salespersons through their own businesses are not exempt.

Comments on the proposed rules are due by Nov. 15.